UK Cypriots scramble to beat savings levy by moving money

By Costas Pitas

Published March 18, 2013

Reuters

LONDON – Cypriots in Britain were scrambling on Monday to transfer money out of closed banks in their homeland in an attempt to beat a proposed savings levy which has stoked depositor worries across the euro zone.

Cyprus's proposed tax on bank accounts, part of a 10 billion euro ($13 billion) bailout by the European Union, has angered many of the 300,000 Cypriots and British citizens of Cypriot extraction who live in Britain.

"For sure, from tomorrow morning, my account balance in Cyprus is going to be zero," said Constantinos Pittas, a 28-year-old owner of a fish shop in London who moved to Britain from Cyprus a decade ago.

"I will send my money to a different country or I have to do something because who tells me now that in six months, they're not going to do the same," Pittas told Reuters. "I think the UK is the best place."

The Cypriot government is working to soften the blow to smaller savers by tilting more of the tax towards those with deposits greater than 100,000 euros ($130,700).

Residents on the Mediterranean island emptied cash machines over the weekend and though Cypriot banks were shut on Monday for a bank holiday, British lawmakers warned on Monday that they could face a run when they open.

London has been the destination of choice for capital fleeing the sovereign debt and banking crises of the euro zone. British government bonds rallied on Monday.

On the streets of north London, home to one of the world's biggest Cypriot communities, there was anger mixed with worry about what to do with savings locked inside closed banks.

"My Cypriot constituents are shocked and angered that the much-publicized deposit guarantee system appears to be worthless," British lawmaker Andrew Love who represents a constituency in north London told parliament.

"They are further outraged about having been (told) the reason for this is that the banks have gone bankrupt, therefore the deposit guarantee doesn't apply."

At a bakery making traditional Cypriot cakes and bread, the owner was on the phone discussing how to manage her financial affairs and whether any of her savings would come out of the automatic teller machines on the island.

"I'll bring them back definitely. I won't go there to live, I don't want to go there anymore," said Maroula Ioannou, 62, saying she had lost tens of thousands of pounds, and had been planning to use the money to retire to Cyprus.

The Bank of Cyprus and Cyprus Popular Bank - known in Greek as Laiki - were open for business on Monday in London.

"What is clear from the proposals so far is that the levy will not apply to foreign branches of subsidiaries of Cypriot banks, including those operating in the UK," Britain's financial services minister Greg Clark told parliament.

But for many Cypriots in Britain, the decision is clear: move your funds to Britain.

"Everyone's going to do it," said Pezouna Dimosthenous, a 76 year-old retired sewing machinist. "When you see that there is no future in Cyprus aren't you going to want to bring them here?"